On June 30, 2006, *Automobile Report* highlighted the crucial role of a robust auto parts industry in driving China's automotive development and enhancing its self-reliance. The report emphasized that for the Chinese auto industry to grow sustainably, it must build a strong and competitive parts manufacturing system.
On June 23, 2006, the China Association of Automobile Manufacturers and the National Bureau of Statistics’ Department of Industrial Transport Statistics jointly released the "Top 100 Auto Parts Companies of 2005" in Beijing. Among these top 100 firms, 22 companies achieved sales over 2 billion yuan, making up 22% of the list, yet they accounted for 61.44% of total sales revenue. Notably, four companies exceeded 100 million yuan in sales.
Despite this progress, the auto parts sector still lags behind vehicle production. In 2005, the top 100 companies generated 217.577 billion yuan in sales—a 10.7% increase from the previous year. This represented 63% of the total sales revenue from all 4,447 auto parts companies above the scale threshold. While the industry has improved significantly, it still faces challenges in keeping pace with the rapid growth of the automotive sector.
Jiang Lei, Executive Vice President of the China Association of Automobile Manufacturers, stressed that building a strong auto parts industry is essential for China to transition from a major car producer to a global leader. "Enhancing competitiveness, optimizing industrial structure, and improving development capacity will play a vital role in this transformation," he said.
Currently, China’s auto parts industry has moved beyond the old pattern of being large in quantity but small in scale and low in quality. It now supports domestic automakers more effectively. However, the industry still faces structural issues, including technological gaps and limited scale compared to foreign competitors.
A notable trend is the growing presence of foreign-invested enterprises in the Chinese market. Out of the top 100 companies, 54 are foreign-owned, while 44 are domestically funded. In 2005, over 90 international auto parts companies signed new investment agreements in China—three times more than in 2004. Renowned firms like Bosch, Delphi, Visteon, ZF, Denso, and TRW have established joint ventures or wholly-owned subsidiaries in the country.
This influx of foreign investment highlights both the potential of the Chinese market and the challenges it poses to local companies. Despite growth, many domestic firms lack the ability to independently develop products and compete globally. For example, in 2005, Bosch reported sales of $49.759 billion, and Delphi reached $28.7 billion. In contrast, Wanxiang Group, China’s leading auto parts company, had sales of only 2.5128 billion yuan. Compared to the world’s top 100 auto parts suppliers, China’s top 100 companies lag by more than tenfold in revenue.
Moreover, foreign investment continues to rise, with multinational companies gaining control over key technologies and dominating OEM markets. As Jiang Lei noted, foreign investors are shifting from equity participation to full control, moving from joint ventures to sole ownership, and transitioning from ownership to monopoly.
China also faces trade challenges, including anti-dumping investigations and non-tariff barriers affecting auto parts imports. These issues signal an increase in trade disputes, which could impact the industry’s growth.
Looking ahead, the 11th Five-Year Plan (2006–2010) is a critical period for the auto parts industry. Strategic adjustments are needed to leverage opportunities in independent innovation and global industry shifts. The goal is to optimize industrial and product structures, improve development capabilities, and meet both domestic and international demands.
To achieve this, the industry should aim to become an international auto parts procurement hub. With global automakers planning to source $50 billion worth of components from low-cost countries by 2007, Chinese firms must strengthen their production bases and expand into global OEM and after-sales markets.
Additionally, companies need to enhance R&D capabilities, build unique brands, and operate on a larger scale. Cooperation with vehicle manufacturers is essential to develop high-quality, cost-effective, and technologically advanced parts.
Industrial mergers and reorganizations are also necessary to boost specialization and efficiency. Establishing partnerships between parts and vehicle companies can further support innovation and development.
In conclusion, the Chinese auto parts industry must leverage its comparative advantages, focus on niche areas, and work toward creating a few “small giants†in key sub-sectors. By doing so, it can accelerate its integration into the global supply chain and establish itself as a leading force in the automotive industry.
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